In Cournot's duopoly model,a firm's profit-maximizing level of output:
A)depends on the market price of the good.
B)is based on the assumption that the other firm produces zero output.
C)based on the other firm's expected level of output,which is assumed to remain unchanged.
D)is equal to the other firm's expected level of output,which is assumed to remain unchanged.

Question

Quizplus · Accepted Answer

In Cournot's duopoly model, each firm determines its profit-maximizing output level by assuming that the other firm's output level will remain unchanged. Therefore, the firm's profit-maximizing level of output depends on the other firm's expected level of output, which is assumed to remain unchanged. This is why choice C is the correct answer.

In Cournot's Duopoly Model,a Firm's Profit-Maximizing Level of Output